eBay in 'Buy It Now' Patent Dispute

smooth wombat writes "The Office of the Solicitor General of the United States has filed a brief with the Supreme Court, taking the side of MercExchange who is in a patent dispute with eBay over eBays Buy It Now feature. Two lower courts have already upheld MercExchange's patents including finding that eBay had willfully infringed on the Buy It Now patent. Later this month the U.S. Supreme Court will hear oral arguments. The Office of Solicitor General is arguing eBay should be barred from using Buy It Now due to the decision of two lower courts that upheld MercExchange's patents. eBay is arguing that infringements should not automatically result in injunctions and shutdowns."

Comments

The Details

[eldavojohn]

What MercExchange LLC (US) has are a handful of patents that are titled as "consignment nodes" which seem to be completely centered around electronic auctions and commerce.

Where I think eBay is in trouble is that in a few of these patents, MercExchange references the idea of two different specified prices, with "buy at" or "sell at" similar to eBay's "Buy it Now" price. Taken from their patent on dynamic pricing information:

The bid control 614 may provide a link to a web page that allows a participant to place a "buy at" or limit type order to bid into a dynamic pricing system. Here, for example, the navigational dynamic instance may appear at the sub-sub-topic or brand level and the bid control 614 may provide a link to a branded web page 632 of a brand participant that is participating in a dynamic pricing system.

There is a lot to read in their patents but the reason this case is so compelling is that MercExchange patented a very descriptive and complete dynamic pricing scheme and hierarchy to auctioning online in patent US6856967. I'm very confused as to why the date on the patent reads 2005-02-15 unless this is a renewal date.

I'm not a lawyer but I do wish that articles covering patent cases would link to the actual patent documents themselves so that the public can become aware of the extreme legalese that enshrouds patents.

What will be interesting is what the lawsuit may entitle MercExchange to receiving. eBay has had this feature for quite a few auctions and I wonder if MercExchange is going to demand a cut of eBay's cut for each auction transaction completed where this feature was available. That's quite a bit of cash.

Honestly, it looks to me like this will hold up in court. Any real lawyers out there have any comments to make? I'd ask you to read the patent and tell us what you think but I lack the $250/hour you charge.

Re:The Details

[dnoyeb]

How is this different from a market order or a limit order? Are they going to sue the NY exchange or the NASDAQ next?

Re:The Details

[LeonGeeste]

It's not just that; the patent in the story covers every single retail outlet in the world. All of them have "buy it now" prices for their merchandise.

Re:The Details

[PortHaven]

It's all fuckin' bullshit.

In fact, there is ton of prior evidence. Shoot, I myself have said "I'm selling my xyz thing, to whoever offers me the most for it. But if you give x $$$ I'll give it to you now."

I don't see the validity of patents like these. The workflow already existed. Just cause it's incorporated in a different medium does not seem to have validity before my eyes.

It's crap, everyone knows it....and in some ways, I am just waiting for enough of these crappy patents to happen that we say !@#$% the whole patent system and re-write the whole damn thing.

Re:The Details

[KarmaMB84]

The patent seems rather focused on e-commerce and on there being both an auction (best offer) and a "direct buy" (buy it now) price. Retail outlets online or otherwise generally aren't auctioning items so their price is just that: a price. Since there's no auction price or otherwise, then this "direct buy" price wouldn't infringe. The killer for eBay is that they actually negotiated with the patent holder; therefore, they knew about it and are infringing willfully.

Re:The Details

[russotto]

"Buy it now" isn't a "limit type order", which would be on the bidder side, not the sellers side. It's a slight variant on "or best offer" -- that is, "I'll sell this for $50 or best offer", the variant being that the $50 offer is only good until the first non-$50 offer. The idea that this is patentable merely because it's done as part of an online auction (as opposed to an online classified ad) is ludicrous (like much of the rest of the patent system).

Of course, MercExchange has dressed this simple idea up in excess verbiage to disguise the fact that it's neither novel nor non-obvious. EBay would probably rather not point that out as they have a bunch of similar patents on non-novel ideas.

Re:The Details

[servoled]

I'm very confused as to why the date on the patent reads 2005-02-15 unless this is a renewal date.

The 2005-02-15 date is the issuance date, i.e. the date at which the application became a patent. The real date(s) you want to look at is the application date (and the priority date if there is one). In this case, the application date is 1999-10-21 and there is no priority date. Therefore, to qualify as prior art someone would have to have been published or sold to the public prior to 1999-10-21.

Re:The Details

[terrymr]

You're free to offer any amount you like to buy something in a store, most store staff will look at you funny, but who hasn't tried to haggle for a free something when buying a high $ item.

The price on the tag could be considered the "buy it now" price at which the store owner has already indicated they'd sell.

Re:The Details

[cwgmpls]

ALL retail sales are an auction with the list price being the "buy it now" price. That is called the "free market". I walked into Best Buy last year, told them I wanted to buy a washer, dryer, fridge and stove all at once, and asked if would they take 10% off of the total list price for me. The salesrep looked through his books, and agreed. In some countries, negotiating over listed price for consumer products is common practice. In the U.S. it isn't -- except, oddly, for cars.

Certainly the sticker price for a car is the "buy it now" price, even though the vast magority of people will make a counter-offer that the car dealer will accept.

Re:The Details

[OnlineAlias]

You are so right. Back before Ebay even had a "Buy it Now" I would look at an auction and think, "Damn, I wish I could just buy that now".

Maybe there should be a clause in the patent code that says, "if it is so stupendously obvious that any fucktard would have eventually thought of it you can't patent it."

Re:The Details

[jaaronc]

There is. One requirement of a patent is that it be non-obvious.

Re:The Details

[hey!]

Every invention involves using using other things that are already invented. Otherwise it wouldn't be possible ot make head or tails of them.

It's using those pieces in novel ways that constitutes invention.

Consider: a lever is one of the "basic machines". It occurs in copious numbers in a wide variety of machines. But supposing I find a place in the drive train where adding one doubles fuel economy. Would it not be an invention because it combines two things that already existed?

By analogy (which is how legal precedent works after all -- analogy to paradigmatic cases), just because some commercial mechanism already exists doesn't mean that you can't patent adding that mechanism to a business method, provided it hadn't been done before or is not otherwise obvious.

Re:The Details

[AlterTick]

It's all fuckin' bullshit. In fact, there is ton of prior evidence. Shoot, I myself have said "I'm selling my xyz thing, to whoever offers me the most for it. But if you give x $$$ I'll give it to you now."

Indeed, if you've ever looked through the classified ads and seen something listed for sale at "$50 OBO", then you are looking at an informal auction with a Buy It Now price. The idea that they can patent it because it is via an automated web-based system is just more of the same asinine "[old idea]...on a computer" patent nonsense.

Re:The Details

[DRJlaw]

The parent post is incorrect.

The patent issued on 2/15/2005. The patent was filed on 10/21/1999. There is no disclosed priority date that predates the filing of the U.S. application.

To "qualify as prior art"*, someone would have to show that the claimed invention was "known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent." (35 U.S.C. 102(a)). Since you cannot know when the claimed subject matter was invented simply by looking at this patent document, you cannot simply look for anything published prior to 10/21/1999. You must look for the earliest references that you can find, and if the only art you can locate is within a year of this date, there is a reasonable chance that you are throwing your money away challenging the patent.

More commonly, someone could also show that the claimed invention was "patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States." (35 U.S.C. 102(b)). This provides you with a known date to beat, 10/21/1998, and ensures that the examiner in a reexamination or the judge in a court proceeding will reach the meat of whether or not the claim is anticipated and/or obvious.

The subject matter of this patent could very well have been sold to the public prior to 10/21/1999 and not be prior art. It could have been sold in the U.S. from 10/21/1998 onwards and not be prior art. It could have been sold in Canada in the early 1990s and it would not be prior art, at least in the United States. Posters on Slashdot use "prior art" the way my parents use "CPU" to refer to the entire big beige box. Stop and think about how you think about people like my parents. Then sit down and take some time to actually read the patent statute.



*Things do not "qualify as prior art" simply because they occurred on a particular date. 35 U.S.C. 102 has a rather extensive list of what is and what is not prior art, and at what time prior art events have to have occurred. There are five more subsections that are even more complex, in general, than the ones cited above.

Re:The Details

[SillyNickName4me]

In the mid 90s, I went to a big store near where I live to buy a TV. Another nearby store was sellig the same TV for approx 10% less, but their service sucks.

I made the store where I bought it an offer of 7.5% below their price, and they accepted. THey asked why I did that, but noone looked funny at me, rather, the clerk had to check with his boss and then made the deal..

Oh, and if you ever get to places in South East Asia, people won't look funny at you at all for sucha thing, rather, they laugh their ass off behind your back for not doing it (you often end up paying twice or more of what you should)

At any rate, that such concepts can be patented is one of the best signs I've seen so far that the USPTO approves things that it really really shouldn't, and again makes me doubt the level of understanding and intelligence of those who approved this patent.

Prior art + prior well known motivation == obvious in the legal sense. Both clearly exist in this case (not to mention the concept is obvious in the common sense of the word as well)

Non-obvious?

[Anonymous Coward]

Whatever happened to the whole "non-obvious" part of a patent?

Re:Non-obvious?

[Pofy]

You missed the digital revolution. Today, as long as you add "with a computer" or "on the internet", everything turns completely non-obvious and is thus patentable. Just take any ordinary activity you can think of and slap on "with a computer". Instant patent!!

Re:Non-obvious?

[kuwan]

Well, duh! It's on the Internet! Nobody in the world would ever think to do that! New medium equals new patent!

Like email on a cell phone. I should patent that! Errr, wait, did someone do that already? OK, I'll patent auctions in space and email in space, I don't think anyone's done that yet.

It's all just a load of crap.

Re:Non-obvious?

[nickname225]

I'm a lawyer - although patents is not my area of expertise. I've been looking at the upcoming Supreme Court schedule and it is looking to be a banner year for patent cases. In addition to the Ebay case, which centers on the issue of the automatic injunction, there are several cases that will allow the court to review the USPTO practice of granting patents to business processes and algorithms. So this is going to be a very interesting year for patent issues in the Supreme Court. If they get it right - it will resolve many of these problems - of course if they get it wrong....

Re:Non-obvious?

[torokun]

I am not a lawyer, just a law student. This is not legal advice.

The nonobviousness requirement is a legal requirement that has a particular meaning in patent law. It's not the same as the ordinary words "not obvious".

Often people would take the words "not obvious" to mean "hard". But this is a mistake. For example, the term "non-increasing sequence" does not mean a decreasing sequence. It means a non-increasing sequence. Similarly, the term nonobvious simply means something not obvious, and doesn't mean it's necessarily very hard.

What it really means in terms of the law is that the invention would not be obvious to one of ordinary skill in the art, sitting in a room at the time of invention, with all the then-existing relevant references in the world arrayed around him. In practical terms, to be obvious, all the elements of the invention must have been disclosed at the time of invention in some reference, and there must be shown some motivation or reason to combine disparate references to create the invention.

For instance, if one reference taught a razor, and another reference taught a harvester with three blades and blade-guards, without more the invention of a modern three-blade razor would not be obvious, because there is no motivation to combine those references. Now, if the razor reference had said "I looked at some farming technology in developing the razor", you might be able to say it's obvious.

One problem in evaluating obviousness is that courts often improperly evaluate obviousness in hindsight, while the proper consideration is whether it would have been obvious at the time of invention. But on the other hand, it is harder to prove obviousness than other invalidity arguments, because it involves multiple references, and requires a motivation to combine them.

Wave bye-bye to karma...

[kbonapart]

Wait! Does this mean I'm going to lose the "Buyout" function in the AH in Og?

To be followed by...

[alexhs]

... a dispute about the patented concept of "internet commerce".

"critical mass"

[Saeed al-Sahaf]

Without getting into the actual validity of either of these groups of patents, I think these types of patent wars are both inevitable and good. They are inevitable with a system that allows for patenting the kind of obvious and basic things ours does, and good because eventually, the government and the large companies that hold sway over it may soon realize the folly of our current patent system, when everything becomes patented, and nobody can build or do anything without horrendously expensive and complicated licensing. The more patents and patent snits like this, the better. Only when the system reaches "critical mass" will it implode.

Buy it now - NOW!

[digitaldc]

This one involves eBay and a company called MercExchange LLC, which says eBay's popular "Buy It Now" auction feature violates patents held by MercExchange.

Solution, put the 'Buy it Now' patent on sale on eBay using the 'Buy it Now' feature for $50 million. Ebay will buy it then, and the problem is solved.

Perhaps not an injunction...

[ursabear]

I have not read the patent in detail. However, for a moment, assuming the article and summary are correct, then I think one of the big issues is whether or not a given business activity should be shut down/suspended when a patent challenger indicates infringement.

If eBay patently (no pun intended) infringed on the patent, then they must reach settlement with the patent holder, no doubt. But - I don't think the business activity should necessarily be shut down until such a settlement can be reached. (Please bear in mind that I'm over-simplifying to stimulate the point here...)

If a patent holder wishes to interrupt the business of an alleged infringer, there should be a fixed set of things that must occur before the alleged infringer must cease the patented activity or product. OTOH, two judges have already agreed that eBay is infringing. Are the judges' decisions enough evidence for suspension of activity or product?

Real store patent?

[ClockN]

So who owns the patent for selling items in the first place? Is the idea of having a store or a shop with item for sale inside with a price sticker patented? Quick somebody get me a patent attorney!

So this is why...

[Saeed al-Sahaf]

That rhetorical trick is good for scoring on sophomore girls who don't know any better, but not for serious intellectual discussion.

This explains my inability to get laid in high school: It never occurred to me to discuss the politics of patent law with my dates...

erm ... shops

[the bluebrain]

Depending on how you lay things out, every vendor for the last, oh, 40'000 years (you know, since "you give club, I give sheepskin") has been "infringing" on this "patent". Basically what eBay is doing is they have a shop, on the web, where people can peddle their wares. The "buy it now" price is the selling price (the club, the sheepskin), and the "OBO" is covered by the auction logic.

What astounds me is that there is a person out there, who has managed to stand up on his hind legs, and is stating that this is his invention. How does this guy interface with other people? How does he stand being laughed out of every conversation where his job or his "abilities" come up? Is ripping off one of the rare successes from the internet bubble a legitimate career now? Do these guys have no pride whatsoever?

Workaround

[peaworth]

Workaround -
A button that says:
Buy it... wait... Ok, now

How is this an "Invention"?

[kuwan]

Patents should be issued for physical inventions - actual physical products that you can hold in your hand - a propeller-hat or Dippy Drinking Bird for example. Patents should not be issued for business methods - a.k.a. any idea that comes out of my ass at work. It's patents like these and the ones behind the Blackberry case that show that these types of patents are completely anti-productive and against the original purpose of the patent system.

Basically, they are existing ideas or "business methods" applied to a new medium. There's nothing novel or unique about them. Someone just said, Hey, you could do auctions on the Internet, let's patent that! or Hey, you can do email on a cell phone, let's patent that!. I might as well start applying for patents for Email in Space! or Auctions in Space! That'll make me rich.

These things are so stupid and obvious I'm surprised that Judges will uphold them. Technically I suppose they're probably just following the law and their hands are tied. But that just means that the law needs to be changed - fat chance of that though considering the lobbying power of the large patent holders.

Re:How is this an "Invention"?

[SomeoneGotMyNick]

Please Sir,

You should limit your statements to newspaper print only. You are violating my patent on editorializing via electronic media.

In other news. . .

[AcidLacedPenguiN]

In an effort to curb any patent infringement issues, Walmart Corporation removes cash registers in all stores opting instead for making customers wait 3 days and 12 hours and 39 seconds before paying for merchandise.

Business Method vs. Business Technology Patents

[Gallenod]

I can see patenting a cash register. That's technology someone had to develop and produce. But isn't claiming a patent on "buy it now" a bit like patenting the use of a cash register instead of the register itself?

If you can "patent" a method of doing business, isn't the first company to ever use a cash register entitled to receive business method patent royalties from all the copycats who started using them later?

Re:Business Method vs. Business Technology Patents

[Scarletdown]

I don't know if the auction is capped at the fixed price though. I'd assume so.

No. The auction is not capped at the BIN price. Once a bid has been placed (provided the reserve price, if there is a reserve has been met or exceeded), the Buy It Now option goes away, and the item goes to the regular auction format with no upper limits.

I myself have been pleasantly surprised the few times I have had items end up going for higher than what the Buy It Now was. And in a few instances, I have been amused to discover that the winning bidder in those instances ended up being the one who initially bid and popped the Buy It Now, paying more in the end than what he would have paid had he just made the purchase with BIN.

Constitutional Import

[NoData]

I think one of the big issues is whether or not a given business activity should be shut down/suspended when a patent challenger indicates infringement.

Yeah, I think you've hit the nail on the head. This case would not be heard by Supreme Court unless there was a matter of law that needed clarification in regard to its constitutionality. From what I gather this is the only matter that the Supremes will be considering. From the article:

EBay filed an appeal with the Supreme Court, which will hear oral arguments later this month. In its filing with the Supreme Court, eBay argued that infringements should not automatically result in injunctions and shutdowns. The company also pointed out that MercExchange has not been in the online auction business since 2000, so eBay's use of Buy It Now was not sufficient to merit an injunction.

So it sounds like the issue is "when is an injunction a fair remedy?" Unfortunately, it does not sound like they will be considering whether business methods, virtual devices, etc. are patentable, which is of course what most Slashdotters are debating here. If someone has more detailed insight, that'd be great to hear.

Re:Constitutional Import

[dpille]

From reading this Amicus brief, it appears the issue is that the rule in the courts has evolved from authorization to issue injunctions "in accordance with the principles of equity" to a situation where a patent holder is entitled to an injunction "absent exceptional circumstances."
 
The brief makes a pretty good point about why that's not appropriate in terms of the financial services industry. I'm not sure that the fact that ebay has a ton of customers who could continue to auction things without a 'buy it now' price means an injunction would be inequitable. If ebay is considered a willful infringer, it seems like you have to enjoin them in circumstances short of huge disruptions to non-parties.

Patent Link

[Crilen007]

http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PT O2&Sect2=HITOFF&u=/netahtml/search-adv.htm&r=2&p=1 &f=G&l=50&d=ptxt&S1=MercExchange&OS=MercExchange&R S=MercExchange

Patent information.

Buy It Now and dealers are killing eBay

[smooth wombat]

While I know there are many on here who will say that these patents are bogus, eBay screwed up both by violating someones patent as well using the Buy It Now feature.

The article clearly states that eBay was in negotations to license this patent but negotiations broke off. eBay then went ahead, knowing that someone else held the patent to this service, and instituted Buy It Now anyway.

Further, Buy It Now is becoming the norm rather than the exception. When eBay started they were an online auction company. People put up stuff to sell and let the market determine the price.

Now, Buy It Now is overtaking the auction feature and dealers are holding sway. For example, I'm looking to add to my camera equipment. When I do a search for my particular type of lenses I get 11 pages back. Of those pages at least half are Buy It Now from dealers.

Do a search for lens accessories and 3/4 of the pages are from dealers. Camera cases? 90% of the listings are from dealers using Buy It Now.

I was fortunate enough to pick up a lens last weekend. I took a look at the bid history and checked the last person to bid (2 seconds before the auction closed). Sure enough they were a dealer and everything the person had for sale on their site was Buy It Now.

This is alot like flea markets nowadays. In the past the people selling stuff were like you and I. Now when you go there are dealers galore.

I'm not against the market system, that's what eBay was originally founded on. However, by allowing people, particularly dealers, to set a specific price, defeats the whole purpose of an auction.

Yeah, yeah, I know. If you don't like it, don't buy from the dealers. I don't. The point is that when dealers control the vast majority of the listings that will drive the price up for everyone else since there will be fewer true auction listings for people to choose from.

Personally I can't wait to see Buy It Now be done away with.

Re:Buy It Now and dealers are killing eBay

[scharkalvin]

Ebay is BOTH an auction house AND an online store. Dealers selling with buy it now are not really using the auction feature, but rather the online store. The problem comes with an auction that has both the biding AND buy it now enabled.

There is nothing wrong with the buy it now in an auction, provided that the feature dissolves as soon as the first bid above any possible reserve price is received. Also, buy it now should NOT be allowed (in an auction) when the reserve price is equal to the buy it now price (or less than it by an amount less than the bid increment). This case is NOT an auction, it is an online store, and the seller should be forced into such (with higher selling fees).

Finally Ebay should allow the buyers to have the search engine ONLY find auctions, online stores, or both at the buyers choice.

add ".. on the internet" to fortune cookie

[GodWasAnAlien]

This is similar to the "add 'in bed' to fortune" joke.
Except this is the business model.

Add "on the internet" to your fortune or anything else.
It is patentable, unless someone beat to to it.

Examples:

Fortune says: "Don't wait for happiness, buy it now"
Patent: Buy it now ... on the internet

Fortune: Do not sell your horse, if you can instead sell you cat.
Patent: Online cat bidding system

In other news...

[just_forget_it]

MerchExchange and Ebay are both being sued by the ghost of Adam Smith for Intellectual Property theft of "Economics."

Re:My new patent is the best of them all

[Scarletdown]

I've called this process "taking a crap" and any American wishing to produce a bowel movement will shortly be in breach of my patent.

Would just calling it something different such as deploying the troops or dropping the kids off at the pool be a way around your patent?

Also, you could probably get this patent passed easier if you make it "Taking a crap on the Internet." Then again, there's some prior art for that (spammers, AOL, and Internet Explorer, for example). ;)

Re:Patents -- the true evil arm of government

[0123456]

"Because lots of companies are going to throw millions of dollars into R&D when the company next door can just wait for them to produce something, then produce an exact copy."

Companies do that all the time.

Company A has a dozen patents on manufacturing widgets. Company B has a dozen patents on manufacturing widgets. Neither Company A or Company B can manufacture widgets without infringing, so they cross-license their patents to each other.

So patents don't prevent Company B from 'copying' Company A's products. They're just a government-mandated monopoly to prevent Company C from entering the market, because they have no patents to trade. Patents then become a subsidy to company profits and a major cost to consumers who have to pay higher prices than they would in a free market, nothing more.

Easy way around this.

[jocknerd]

Change the "Buy it now" to "Buy it in 5 minutes"

These patents are just so f'ing stupid.

Re:Patents -- the true evil arm of government

[Danse]

Either patent something new or pay the licensing fee.

Hard to patent something new if you don't have the cash or existing patents to defend yourself with. They can tie you up in very expensive litigation for years. Hardly an incentive for innovation. The patent system is out of control now. Someone needs to seriously reign it in. Getting rid of business-method patents, probably software patents, and going back to the working prototype requirement would be good starts. Raising the bar (a lot) for obviousness is essential as well.